Colorado wholesale distributor Federal Fruit & Produce Co. Inc. is rolling with several changes in the local produce industry.
One of those changes is happening inside its own building.
Federal, which is headquartered in Denver and has distribution centers in Denver and Colorado Springs, has been owned since 1987 by chief financial officer John Domenico, company president Stan Kouba and chief operating officer Mike Martinelli.
Domenico decided to call it a career this year, Kouba said.
Domenico’s retirement is the first step in a process that eventually will involve Kouba and Martinelli handing over the reins of the company.
“There’s another generation behind us, and the goal is to have them take over the business,” Kouba said.
Domenico, Kouba and Martinelli all have sons who work or have worked at Federal. There also are non-family members Kouba considers to be future leaders, after he and Martinelli have hung up the gloves.
“I’m not sure we’re going to play golf, but at some point, Mike and I won’t be getting up every day before dawn,” he said.
That internal turnover at Federal has been matched by changes outside its four walls.
“There’s been a lot of churn in the Colorado market,” Kouba said.
Much of that churning came when the Albertson’s retail chain closed its Denver distribution center in 2010. Several Albertson’s stores closed in its wake, and Kouba said rivals have been scrambling to fill the vacuum.
Another market disruptor has been the rise of niche grocery stores over the past five years, Kouba said. In the high-end sector, Whole Foods and Sprouts have led the way. Retailers catering to growing Hispanic populations also have been booming, he said.
“It’s been an interesting time in the produce business,” Kouba said. “The key is to respond and change as the market changes.”
Plantains, for instance, used to be a specialty item only for Federal. Now they’re more of a staple.
“The growth in Hispanic items has been pretty dramatic,” Kouba said. “They’re reaching a broader base of consumers.”
Federal also is seeing steady growth in its sales of produce staples.
“We used to sell broccoli by the pallet, now we sell it by the half-truckload,” he said. “Business has been good.”
On the foodservice side, years of sluggish restaurant activity have started to slowly reverse course, Kouba said, thanks in large part to one sector in particular.
“Our foodservice business has grown largely as we’ve gotten more chain business,” he said.
Keeping a wide client base has always been important to Federal, Kouba said. The company’s clients include large grocery chain stores, smaller specialty grocery stores, local foodservice distributors, national food service distributors, school districts and universities, large restaurant chains and independent restaurants.
Federal also is a member of the Produce Alliance network of foodservice produce suppliers.
The company hasn’t been immune to skyrocketing fuel costs. The company distributes products to five states, but has scaled back its shipments to North Dakota and Utah because of high costs, Kouba said.
“They’re markets where by the time you get there, you’ve eaten up all the margins in the product,” he said.
Kouba said he looks forward to future innovations in the trucking industry similar to ones that already have taken place in the aerospace industry: namely, the development of engines that are vastly more fuel-efficient.
Federal, which was founded in 1935, employs about 90 people at its Denver facility, which has annual sales in the $50 million range, making it the largest produce wholesaler in Colorado.
The Colorado Springs facility specializes in foodservice business. About 40 people work there, and annual sales tally about $10 million.